LONDON–(BUSINESS WIRE)–AM Best revised the outlook from negative to stable and affirmed the financial strength rating of B++ (good) and the issuer’s long-term credit rating of “bbb” (good) of the joint stock company subsidiary of Halyk Bank of Kazakhstan Halyk Insurance Company (Halyk Insurance) (Kazakhstan).
These credit ratings (ratings) reflect the strength of Halyk Insurance’s balance sheet, which AM Best assesses as very strong, as well as its strong operational performance, limited business profile and marginal management of business risks.
The revised outlook to stable indicates the increased resilience of the company’s balance sheet as well as management’s actions to address underperformance in mandatory motor vehicle liability (MTPL) policies, supported by improved risk selection and discipline. subscription.
Halyk Insurance’s balance sheet strength is underpinned by top-tier risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), and its relatively conservative investment portfolio with good liquidity. . Internal capital generation is supported by a revised dividend policy which limits the annual dividend distribution to a maximum of 50% of the previous year’s earnings. Compensating factors include the company’s reliance on reinsurance and its significant exposure to the high risk of the financial system in Kazakhstan.
Underwriting results improved slightly in 2020, with the company posting a combined ratio of 96.1% compared to 97.9% in 2019 (as calculated by AM Best). 2020 results were positively impacted by lower loss ratios for MTPL’s portfolio due to pandemic-related lockdowns. Overall profitability was strong, demonstrated by a five-year (2016-2020) weighted average return on capital of 14.0%, although this was partly the result of strong investment returns, given the inflationary environment relatively high in Kazakhstan in recent years. Halyk Insurance is one of the leaders in its domestic non-life insurance market, ranking second in terms of gross written premiums in 2021.
AM Best does not consider the financial strength of Halyk Insurance to be affected by the weaker credit profile of its parent company, Halyk Savings Bank of Kazakhstan JSC (Halyk Bank). This reflects AM Best’s consideration of the regulatory protection that restricts the extraction of capital from the insurer to its detriment.
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